Big Banks on Track to Meet Basel Capital Rules Ahead of Time

The world's top banks have made big strides towards meeting tougher capital rules several years before full compliance is required, global regulators said on Tuesday.

Big strides towards meeting tougher capital rules several years before full compliance is required, global regulators said on Tuesday.

The new rules known as Basel III were the world's main regulatory response to the 2007-09 financial crisis that forced governments to rescue undercapitalized lenders.

The Basel Committee of banking supervisors from nearly 30 countries, which devised Basel III, said the world's top 101 banks would have needed an extra 208.2 billion euros ($270 billion) had Basel III been in force in June 2012 - 176 billion euros less than in its previous study in December 2011.

Basel III is being phased in over six years from January 2013 but the latest study shows the banks could meet the targets well ahead of time, strengthening them in the face of any future market turmoil.

Markets and regulators have been putting pressure on banks to meet Basel III well ahead of the end-2018 deadline.

The remaining shortfall includes capital surcharges that the very biggest banks must hold from 2016 on top of the Basel III minimum.

The European Banking Authority said a study that it carried out alongside Basel's exercise showed the largest European banks would have needed to raise 112.4 billion euros to meet the 7 percent minimum capital buffer last June.

This means that over half the global shortfall identified by Basel is at 44 top banks in the European Union.

The Basel Committee said the average core capital buffer for the top banks last June was 8.5 percent.

Profits after tax and before dividend distribution at the top 101 banks between July 1, 2011 and June 30, 2012 was 380 billion euros, meaning the capital gap could be plugged without having to raise fresh capital on the market.

Basel also said the top banks had an average net stable funding ratio (NSFR) of 99 percent. The ratio requires banks to have enough cash or cash like instruments for a up to a year to survive shocks.